TECHNICAL ANALYSIS

DETERMINING TRENDS FOR BUYING AND SELLING

USING CHART PATTERNS TO GET PROBABLE
RETURNS IN THE FUTURE.

INTRODUCTION

Contrary to estimating the value of a company or a

commodity by fundamental analysis, technical analysis
deals with the price movements in the market.
It studies the supply and demand in the market in order to
determine the direction or the trend of the price movement
in the future.
It attempts to understand the emotions in the market.

BASIC ASSUMPTIONS

There are three basic assumptions that one should consider

while doing technical analysis.
The market discounts everything.
Price moves in trends.
History tends to repeat itself.

FUNDAMENTAL VS TECHNICAL ANALYSIS

Charts vs Financial Statements.

Time horizon.
Trading vs Investing.

USE OF TRENDS

Uptrend Higher highs

and higher lows.

Downtrend Lower
lows and lower highs.

Sideways trend.

Trendlines.

Trends can be of
different lengths:

Long Term

Medium Term

Short term

IMPORTANCE OF VOLUME

For finding out trend reversals.

Strength of trends.
Volume and chart patterns.
Volume precedes price.

CHART TYPES

CANDLESTICK
CHART
LINE CHART

POINT BAR
AND CHART
FIGURES

CHART PATTERNS
Head and Shoulder pattern Reversal pattern

CHART PATTERNS
Cup and Handle - Continuation

CHART PATTERNS
Double tops and bottoms Reversal pattern

MOVING AVERAGE SMA AND EMA

SMA AND EMA - DR REDDY
3900

Moving average is calculated to find

out whether it is the right time to
invest or sell a particular stock.

3700
3500
3300

If the SMA is above the price then it is

the right time to invest into the stock.

3100
2900
2700

If the SMA is below the price it is the

right time to sell the stock.

2500

Close

10 DAY SMA

12 DAY EMA

MOVING AVERAGE SMA AND EMA

12 DAY EMA VS 26 DAY EMA - RELIANCE GROWTH FUND
900

EMA is more accurate than a SMA as it

gives more weightage to recent events
than past events.

850
800
750
700

It is clearly visible how EMA is moving

closer to the price.

650
600

Also, a shorter day EMA is more

accurate, i.e. 12 day EMA is more
accurate than 26 day EMA.

550
500

NAV

12 DAY EMA

26 DAY EMA

MOMENTUM INDICATORS RSI AND MACD

RSI SMALL CAP FUND

NAV SMALL CAP FUND

100

28

90

26

80
24

70

22

60

20

50

18

40

16

30

14

20

12

10

10

From the NAV it is clearly

seen that the NAV is on a
continuous rising trend.

Overbought signal 68-70 and

above.
Oversold signal 30-32 and below.

MOMENTUM INDICATORS RSI AND MACD

MACD ANALYSIS RELIANCE GROWTH FUND
35
30

Crossovers If MACD is below

trigger, it is a bearish signal and
vice versa.

25
20
15

Dramatic Rise When MACD rises

dramatically, it means security is
overbought and its price will
reduce soon.

10
5
0
-5
-10
HISTOGRAM

MACD

9 DAY TRIGGER LINE

PRICE VOLUME ANALYSIS OBV AND

STOCHASTIC OSCILLATOR
OBV ANANLYSIS - MARUTI SUZUKI
3900

8000000

3700

7000000
6000000

3500

Volume precedes price is the main

theory behind OBV analysis.

5000000
3300
4000000
3100
3000000
2900

2000000

2700

1000000

2500

Close

OBV

A rising OBV can lead to higher

prices and on the other hand falling
OBV reflects negative volume
pressure that can foreshadow lower
prices.

PRICE VOLUME ANALYSIS OBV AND

STOCHASTIC OSCILLATOR
STOCHASTIC OSCILLATOR-AXIS BANK
500

120

480
100

460
440

80

420
400

60

380
40

360
340

20

320
300

Close

%K

%D

K line is the faster and D line is the

slower between the two.
If K and D line moves above 80 it
gives positive selling points and
below 20 gives positive buying
points.
There are many fake buying and
selling points which can also be
identified from this graph.

THANK YOU